IF someone handed you $500 right now? What would you do with it?
This is the first question we ask the students in our classroom #preventdebt workshops! So I’m throwing that same question out to you. What would you do? What you PLAN to do with that $500 is financial planning. Did you allocate any to savings? Did you budget a portion for any bills you may have? Did you invest any of it?
How you plan where your money goes is financial planning! As you continue to bring more income in as you grow beyond student status, into field or career path, there will be numerous other way to financially plan, but at the root of financial planning, is 3 simple money paths.
Keep this in mind as you start working part time in high school or over the summer babysitting or mowing lawns, working at Starbucks etc. Students’ Guide to Financial Planning is HOW to put money in various buckets, but for now it’s getting into the habit of creating 3 “piles” of money.
So whats the difference with savings, budgeting and investing? So glad you’re asking! Once you understand this, you can decide how you want to allocate your money.
What does budgeting mean in regards to financial planning? Budgeting is the portion of your income that you use to cover such expenses such as rent or mortgage, car insurance, electric bills and other living expenses.
With the savings portion, because we know saving means we’re putting money aside that will not be spent, it’s easy to allocate a certain amount of money each paycheck into a savings account, for example.
The third component, the investing portion of your financial plan, is what money are you going to invest in your 401k, real estate, or business that are expected to produce future income? The idea is that you take a portion of what you want to save and invest it to grow with interest.
As with all financial planning, you’ll need to establish what your financial needs and wants are. You’ll need to eat, but you don’t need to eat out every meal. I tell our students in the classroom all day, everyday that learning how to cook will save them thousands of dollars. Establish a healthy balance in your life when it comes to eating in and out. Your wallet and your waistline will thank you!
I’m a mom to 4 boys and a husband that loves to cook. BUT, I still plan one night a week that we do takeout. Its the one night, I don’t have to cook or clean up, do dishes, etc. For me it fits our wallet (budget) and it also is a night where we can enjoy more family time, because I’m not standing over the sink washing dishes and cleaning up the kitchen. For us, this is a healthy balance. You’ll have to create your own balance in your life and enjoy little rewards that you’ve worked hard to achieve.
To help you get started, we’ve included our SMART goals FREE download
So back to you! How are you going to allocate your resources? To get started, start simply. Give, Invest, Live on the Rest. Try the 10/10/80 Rule to start. 10% to savings, 10% to investments and 80% to live on. I guarantee as a student you can be saving way more than 10%!
Find a harmonious balance for you. It’s your life, you design it like you want!
My action step for our classroom students is to write down 3 financial goals, apply them to the SMART goals FREE download and see if your current financial plan is meeting your financial goals.
Does your financial plan help you achieve your financial goals? If not, you might have to look at how you will adapt your savings or spending…
Got questions? Jump on over to our facebook group and ask away!
Until next time, make your plan with purpose!